Forside Co.,Ltd. FY2025 Q3 Earnings Report

Financial Highlights

• Net Sales: ¥6.84B
• Operating Income: ¥393M
• Net Income: ¥-26M
• EPS: ¥8.78

Income Statement

Balance Sheet

Profitability Ratios

Year-over-Year Comparison

Share Information

Dividend Information

Segment Information

Full Year Forecast

Disclaimer

This data was automatically extracted from XBRL files. Please refer to the original disclosure documents for accuracy.

AI Financial Analysis

Executive Summary

Verdict: Mixed quarter with resilient margins and solid balance sheet, but headline operating/ordinary profit plunged YoY while net income surged likely on non-recurring factors, making earnings quality uncertain. Revenue reached 68.42, with gross profit of 15.19 and operating income of 3.93. Gross margin stood at 22.2% and operating margin at approximately 5.7%, with SG&A running at 22.1% of sales. Operating income declined 89.5% YoY and ordinary income fell 84.7% YoY, indicating sharp deterioration in core profitability versus last year. Despite this, net income was 3.79 (+373.0% YoY), lifting the net margin to 5.5% and ROE to 12.6%. The margin structure shows gross margin thinness offset by tight SG&A (gross margin 22.2% vs SG&A 22.1%), yielding a slim but positive operating spread of roughly 10–20 bps. Basis-point comparisons versus the prior year are not available due to undisclosed YoY margin data, but the scale of the operating/ordinary profit declines suggests substantial compression YoY at the operating level. Ordinary-to-net divergence is pronounced: profit before tax was 0.08 while income tax expense was 0.33 (effective tax rate reported at ~434%), yet reported net income was 3.79, implying material below-line/non-recurring effects or presentation differences. Non-operating items were small (income 0.22, expenses 0.21), so the driver of net income strength likely sits in extraordinary items or other JGAAP classifications not detailed here. Liquidity is a clear positive, with a current ratio of 344% and cash of 21.25 against current liabilities of 11.39. Leverage is conservative with D/E of 0.58x and an equity ratio of roughly 63%, and interest coverage is very strong at 61.3x. Asset-light efficiency is respectable: asset turnover of 1.434 supports an ROE of 12.6% alongside modest leverage (1.58x). However, operating cash flow was not disclosed, preventing validation of cash earnings quality and dividend capacity. Goodwill and intangibles total 6.07, which is meaningful versus equity and may pose impairment risk if profitability remains under pressure. Forward-looking, management must stabilize core operating profit and clarify the sources of the net income uplift; without that, sustainability is uncertain. With ROIC indicated at 13.2% and ample liquidity, the balance sheet can support near-term execution, but investors should monitor working capital discipline, extraordinary items, and any impairment signals.

Profitability Analysis

ROE (12.6%) decomposes into Net Profit Margin (5.5%) × Asset Turnover (1.434) × Financial Leverage (1.58x). The primary contributor to the achieved ROE is asset turnover, which is relatively high for the reported asset base, with leverage modest and net margin mid-single-digit. Versus the prior year, operating and ordinary profits plunged (-89.5% and -84.7% YoY), implying the net margin component likely shrank materially YoY even though the current quarter shows 5.5% net margin; the reported net income surge suggests one-off/non-recurring items buoyed the bottom line. Business-wise, the near breakeven spread between gross margin (22.2%) and SG&A ratio (22.1%) explains the thin operating margin (~5.7% given revenue mix and rounding), indicating limited operating leverage and sensitivity to revenue mix/scale. The divergence between profit before tax (0.08) and net income (3.79) points to items outside ordinary income (e.g., extraordinary gains, valuation gains, or reversal effects) under JGAAP presentation that lifted net income despite high reported tax expense. Sustainability is questionable: unless core margins recover and SG&A is contained below gross profit expansion, the current net margin is unlikely to persist at this level without further one-offs. A potential concern is cost discipline: with SG&A nearly equal to gross profit, any gross margin pressure could quickly compress operating income. Watch for signs of negative operating leverage if SG&A growth outpaces revenue growth in subsequent quarters.

Growth Assessment

Top-line was 68.42 (cumulative), but YoY revenue growth was not disclosed, limiting growth-rate assessment. Profit trends are weak at the core: operating income (-89.5% YoY) and ordinary income (-84.7% YoY) signal substantial deterioration in underlying profitability. Net income growth of +373.0% YoY is likely driven by non-recurring items or accounting classification effects rather than operating strength. Non-operating contributions were minor (net ~0.01), so the growth delta likely lies in extraordinary lines not provided. Absent clear revenue or segment disclosure, sustainability of the sales base cannot be confirmed; the thin operating spread implies earnings are sensitive to mix and volume. With ROIC at 13.2%, invested capital appears productive, but this must be validated against future operating cash flow and capex once disclosed. Outlook hinges on restoring operating margin through better gross margin (pricing/mix) or SG&A efficiency. Near term, the robust cash position provides execution flexibility, but continued reliance on non-recurring gains would weaken growth quality. Key watchpoints include order momentum (if applicable), backlog/booking trends, and any disclosure on extraordinary gains. Without OCF or capex data, growth-to-cash conversion is unknown.

Financial Health

Liquidity is strong: current assets of 39.20 vs current liabilities of 11.39 yield a current ratio of 344% and a quick ratio of 344% (no inventories reported). Cash and deposits of 21.25 comfortably cover all near-term obligations. Solvency is solid: total equity 30.12 vs total liabilities 17.59 implies an equity ratio of ~63.1%, with D/E at 0.58x (conservative). Interest-bearing debt detail is limited, but long-term loans are 5.98 and noncurrent liabilities are 6.19, indicating a largely term-structured debt profile with limited short-term refinancing pressure; no short-term loans were disclosed. Interest coverage is very strong at 61.3x, suggesting ample capacity to service debt from earnings at current levels. No explicit off-balance-sheet obligations were reported. There is no warning on current ratio (<1.0) or D/E (>2.0); both are comfortably within healthy ranges. Given goodwill/intangibles of 6.07, tangible equity is lower, but still adequate versus liabilities.

Cash Flow Quality

Operating cash flow was not disclosed, so OCF/Net Income and free cash flow cannot be assessed. This prevents validation of whether the +373% YoY surge in net income is supported by cash generation. With capex unreported, we cannot judge reinvestment needs or maintenance intensity. The balance sheet suggests low working capital stress (AR 9.48 vs cash 21.25 and AP 2.04), but without period-over-period movements, potential working capital releases or builds cannot be evaluated. In the absence of OCF, we cannot confirm dividend coverage or sustainability. No clear signs of working capital manipulation can be identified from the static snapshot, but monitoring AR days and any large quarter-end changes will be important once cash flow statements are available.

Dividend Sustainability

Dividend data (DPS, total dividends, payout) were not disclosed, so policy execution and coverage cannot be assessed quantitatively. From capacity perspective, liquidity is ample (cash 21.25) and leverage is conservative (D/E 0.58x), which would generally support modest distributions if desired. However, with operating/ordinary profit down sharply YoY and OCF unreported, prudent assessment would favor retention until core earnings stabilize. Retained earnings stand at 15.69, providing balance sheet room, but cash earnings support remains unverified. Outlook on dividends hinges on forthcoming disclosure of OCF and visibility on recurring profit generation, not on one-time gains.

Risk Assessment

Business Risks:

• Core profitability deterioration: operating income -89.5% YoY and ordinary income -84.7% YoY.
• Thin operating spread (gross margin 22.2% vs SG&A 22.1%) increases sensitivity to revenue/mix.
• Potential reliance on non-recurring/extraordinary items to support net income.
• Goodwill/intangibles of 6.07 raise impairment risk if earnings remain weak.
• Limited disclosure on segment mix and revenue drivers constrains visibility.

Financial Risks:

• Earnings quality uncertainty due to lack of OCF and capex data.
• Tax rate anomaly (effective tax rate ~434% vs PBT 0.08) suggests classification/volatility risk.
• Potential maturity profile opacity (short-term loans unreported), though current liquidity is strong.

Key Concerns:

• Sustainability of 5.5% net margin given sharp declines in operating and ordinary profits.
• Absence of cash flow statement prevents validation of cash conversion and dividend capacity.
• Impairment risk on goodwill/intangibles if performance does not recover.

Investment Implications

Key Takeaways:

• Headline net income strong (+373% YoY) but likely non-recurring; core profits sharply weaker.
• Margins are tight: gross margin 22.2% and SG&A 22.1% leave limited operating buffer.
• Balance sheet is a clear positive: current ratio 344%, D/E 0.58x, equity ratio ~63%.
• ROE 12.6% and ROIC 13.2% are respectable, driven by asset turnover and low leverage.
• Data gaps (OCF, capex, dividends, extraordinary items) limit earnings quality assessment.

Metrics to Watch:

• Operating cash flow and OCF/NI ratio (target >1.0).
• Breakdown of extraordinary items and reconciliation from ordinary income to net income.
• SG&A trajectory versus revenue growth (seek SG&A growth <= revenue growth).
• Gross margin trends and pricing/mix initiatives.
• Impairment testing outcomes for goodwill and intangibles.
• Debt maturity schedule and any short-term borrowing developments.

Relative Positioning: Within small-cap JGAAP reporters, Forside shows stronger-than-average liquidity and conservative leverage but weaker core profitability momentum; near-term positioning hinges on restoring operating margin and evidencing cash-backed earnings while avoiding reliance on extraordinary items.

Disclaimer

This analysis was auto-generated by AI. Please note the following:

• No Guarantee of Accuracy: The accuracy and completeness of this analysis are not guaranteed. For accurate financial data, please refer to the original disclosure documents published on TDnet or other official sources
• Not Investment Advice: This analysis is for general informational purposes only and does not constitute investment advice under applicable securities laws. It is not a recommendation to buy or sell any specific securities
• At Your Own Risk: Investment decisions should be made at your own discretion and risk. We assume no liability for any losses incurred based on this analysis